Business Ownership

The Private Sector

Sole Trader:
Owned, financed and controlled by one
individual but can employ other staff
Common in local building firms, small
shops, restaurants, butchers, etc.

Business Ownership
Sole Traders: Advantages

Easy to set up
Personal incentive
keep all the profits
make key decisions
high degree of control
Flexibility
Ability to offer personal service

Business Ownership
Sole Traders: Disadvantages

Unlimited Liability
Limited access to capital
Potential for long hours
Pressure of being solely responsible
Lack of continuity business ceases once
owner dies

Business Ownership
Partnerships:

Owned, financed and controlled by upwards

of 2 partners
Terms of Partnership agreed through contract
Bound by the terms of the Partnership Act 1890
Common in professions lawyers, accountants,
architects, surveyors, estate agents, vets, etc.

Business Ownership
Partnerships: Advantages

Greater access to capital

Shared responsibility
Greater opportunity for specialisation
Easy to set up

Business Ownership
Partnerships: Disadvantages

Unlimited Liability
(However since 2001, Partnerships can apply to be Limited Partnerships)
All partners liable for the debts of the others
Partnership dissolved on death of one partner
Potential for conflict
Decisions of one partner binding on the rest
Limited access to capital

Business Ownership
Limited Companies:
Private Limited Company (Ltd) Owned by
between 1 and 50 shareholders
Public Limited Company (PLC) Owned by
minimum of 2 but no maximum number of
shareholders
Has a separate legal identity the company
can sue and be sued
More complex to set up
Minimum share capital of 50,000

Business Ownership
Limited Companies:
Must Register with Registrar of Companies at Companies House

Memorandum of Association
Details of the nature, purpose and structure of the company
Articles of Association
Details of the internal rules of the company

Certificate of Incorporation allows the company to trade

Shareholders have limited liability can only lose what
they agreed to put into the company no personal liability
PLCs shares traded on Stock Exchange
LTDs shares only bought and sold with agreement of
existing shareholders

Business Ownership
Limited Companies Issues

Divorce between ownership and control

Potential for diseconomies of scale
communication, decision making, etc.
Must publish accounts
PLCs shareholders may be large institutions
pension funds, insurance companies, etc.
PLCs - Share value subject to volatility
affects company value
PLCs can be large, complex, possess market
power

Business Ownership
Co-operatives:
Ownership, finance and control in hands of members

Exists for the benefit of members

Consumer co-ops members buy goods in bulk,
sell to members, divide profits between members
Worker co-operatives workers buy the
business and run it decisions and profits shared
by members
Producer co-operatives producers organise
distribution and sale of products themselves
Business Ownership
Franchises:
Method of business ownership backed by established brand name

Owner gets to run a business with less risk

Owner buys the right to use the established companys name,
format products, logos, display units, methods, etc.
Speedy way for business to expand
Become very popular
Owner (Franchisee) responsible for debts, pays a royalty to
owners of the brand, keeps any remaining profit
Franchisee pays a fee for the purchase of the franchise
Common franchises Body Shop, McDonalds, Costa Coffee,
Business Ownership
Subway